Microsoft word - georgia reality check non-paper_final

The “Reality Check” is a policy review process aiming to gather insights from top domestic and
international analysts, practitioners, diplomats and policy-makers working in and on the EaP
countries, with the ambition to discuss these behind closed doors. Under the aegis of the Lithuanian
EU Presidency the first such a review was the Belarus Reality Check, held in Vilnius, Lithuania in
The first meeting of the Georgia Reality Check took place on April 20, 2013 in Bratislava, Slovakia and
gathered top Western and Georgian analysts in order to review internal and external factors
influencing the country's politics. Emphasis was placed on the independent character of the group,
evidence-based analysis and a balanced policy advice. This non-paper is the product of the Bratislava
meeting and the subsequent thorough peer review process.
The period of cohabitation between the ruling Georgian Dream (GD) coalition and the United
National Movement (UNM), which has moved to opposition after it lost parliamentary elections last
October, is coming to an end. Both sides tried to make the cohabitation work, not least thanks to the
external pressure coming from the EU and the US to make the power transition and the ensuing
period as smooth as possible. But the approaching presidential elections (October 27, 2013) as well
as the on-going investigations of former UNM officials – now reaching the party's top echelons –
mean that the political will for compromise is gradually evaporating. In the run-up to October,
political tensions are set to rise. The government and the opposition might try to win the Western
political support for their cause against the other side – but thus far both sides are trying to avoid an
open political confrontation, preferring instead to channel the tensions via their external partners.
Prime Minister Bidzina Ivanishvili remains the single most important factor binding the coalition
rather than a common ideology or agenda – yet it is not clear even for his own coalition partners
what his exact plans are and how long he plans to stay in the office. The government has taken swift
steps to change the status quo inherited from the previous administration in areas such as justice
and penitentiary sector or an increased parliamentary oversight. However progress on a blueprint for
kick-starting the economic growth and addressing Georgia's socio-economic problems, including high
unemployment, has been slower – yet this is precisely the area where most voters expect
improvements. Some steps were taken to alleviate the costs of living in Georgia, including
introducing free pre-school education or lowering the electricity prices.
The government has maintained the previous course and seeks closer integration with the EU: the
Association Agreement (AA) and the Deep and Comprehensive Free Trade Agreement (DCFTA)
negotiations are almost completed and are expected to be initialled at the Vilnius Summit. The EU
integration has so far been one of the few unifying issues the government and the opposition could
agree on: the signature and ratification of these documents is seen by Georgia's political elite as a
guarantee to cement the country's pro-Western track. For the new government, concluding the
AA/DCFTA was also important as an evidence of the administration's pro-EU/NATO policy and a way
to fend off attacks that the government is too soft on Russia.
Key institutions leading the Euro-Atlantic integration are headed by the ruling coalition's most pro-
Western party (Free Democrats). Implementation of these agreements will be crucial: most benefits
will only come in the mid-term, increasing the pressure on the government to deliver on the popular
expectations of economic growth and job creation. The violent anti-LGBT protest that took place in
Tbilisi in May has highlighted that although most Georgians support closer ties with the EU and much
has been done to integrate with the EU institutionally, “Europeanisation” in terms of values and
political behaviour, is yet to take deeper roots in Georgia – this is also confirmed by various
sociological polls exploring the population's attitudes towards European vs. Orthodox Christian
values. The protests also highlighted the potentially important role the Church can play in Georgian
politics, especially if supported by some of the more nationalistic/anti-Western elements in the ruling
coalition – however, their political influence is for the moment marginal.
Similarly to the early years of Mikheil Saakashvili's presidency, the government has tried to reach out
to Russia: without expecting quick progress on Abkhazia/South Ossetia re-integration, Tbilisi has
made an effort to de-escalate tensions with Moscow. This has already brought some results –
Georgian mineral water and wines have been allowed to enter Russian market – but government
wants further progress on trade ties and visa requirements for Georgian citizens in Russia. However,
despite the opening of the bilateral track between Russia and Georgia, Moscow has continued in
'borderisation', installing barbwire fences and recently by pushing the administrative border line
(ABL) deeper into the Tbilisi-controlled territory.
The EU can help mediate domestic political tensions in Georgia only if it remains neutral and
equidistant from the government and the opposition. It will be important to further intensify its
engagement with all domestic stakeholders including a broadly-understood civil society (incl.
The Western clout in Georgia remains strong: the Euro-Atlantic integration has proved to be one of
the few issues uniting most elements of Georgia's political spectrum and remains supported by a
large majority of citizens. The key to supporting further reforms is therefore for the Western partners
to keep the prospect of Georgia's Euro-Atlantic integration open and firm, remain actively engaged
and help consolidate the national consensus on the issue. This will be particularly important in the
upcoming period when trials of former officials will take place. While continuing to monitor the court
proceedings, fairness and proportionality of the court decisions, the EU should avoid being sucked
into the domestic political conflicts between the government and the opposition. This way it can
remain a credible mediator in Georgian politics.
Once the Association Agreement and DCFTA are adopted, the EU should focus its assistance and
resources on assisting with their implementation in Georgia. Building up institutional capacities of
various state agencies and supporting reforms is important. The EU though, should also concentrate
more efforts and resources towards supporting deeper “Europeanisation” of the society via civic
education programmes, dialogue with the Church and public diplomacy, especially in the regions.
Georgia is in a good position to make substantial progress on deepening its ties with the EU: in the
next couple of years, the government will need every help it can get to bring the country closer to
Europe not just in terms of institutions but also mentality and values.
Problems remain but importantly, the government was changed through the ballot box, not
revolution. It is a positive sign that after the elections, both the government and the opposition
agreed to follow the rules of Georgia's political system rather than trying to overhaul the entire
system. Still, cohabitation between the president and the new government is far from orderly and
both sides are increasingly focused on the completion of the transit of power following the upcoming
presidential (October 27, 2013) and local elections (spring 2014) – the closer the presidential
elections are, the less willingness on both sides for a compromise. The ruling Georgian Dream (GD)
coalition remains diverse: this might lead to internal splits and possible dissolution of the coalition
following the 2014 local elections: parties remain bound together by the Prime Minister rather than
by a common ideology or political views. However, initially in 2003/2004, UNM was also bound by
personalities rather than by a coherent government programme.
Georgian Dream-Democratic Georgia (GD-DG) party, Free Democrats and the Republicans are the
strongest coalition parties but National Forum (seen as more nationalistic and less pro-Western) can
also gain traction when activated. These are the parties that have a chance to remain in parliament
even if the coalition splits. On its part, the UNM is trying to recover from the defeat in the
parliamentary elections but with on-going resignations of their members from numerous local
councils in Georgia's regions and the recent pre-trial detention of the UNM Secretary General Vano
Merabishvili, it is struggling to re-brand itself and recruit new members. The role of Mikheil
Saakashvili in the UNM and Georgia's domestic politics after his presidential term ends remains
unclear, adding even more questions about the UNM's future. Moderate voices on the government
and opposition sides are trying to maintain a dialogue but both are increasingly focused on the
upcoming presidential election – both sides are partly to blame: the new government has been trying
to consolidate its position vis-á-vis the president including by restricting his funding but Saakashvili
has not signed number of legislative acts and several ambassadorial nominations.
During the previous government's terms in office, there were few checks and balances – now the
parliament has once again become a space for debate. Political tensions are far from over; these
stem not only from the on-going investigations of former UNM-linked officials – seen by the UNM as
an attack on the party rather than an ambition to objectively investigate past wrongdoings – but also
from the relatively strong role of the Orthodox Church. This became apparent during the violent
clashes between the LGBT-rights activists and their opponents in May. It is unclear what political role
– if any – does the Church want to play in Georgia's politics, but the protests have according to the
observers brought home the point that the government needs to do much more to counter the
xenophobic and nationalistic tendencies within the society. Church remains the most trusted
institution in Georgia (95%). Some argue that by attacking UNM and ignoring the role the Church is
trying to play in Georgia's politics, the government may unintentionally create grounds for the
Church to become the strongest voice against the administration.
The lesson from the previous period is that the UNM government lost power despite the fact that it
presided over a period of relative economic growth (though harmed by the 2008 war and global
economic crisis) – but has nonetheless failed to deliver the expected poverty-alleviation or
widespread job creation: voters also considered the government's democratic performance which
they associated with freedom of speech, rule of law and justice. New government should therefore
be more attentive to both issues of democracy and economy. So far, it looks like the government
might be misreading people's priorities: greatest focus seems to be on reform of the justice sector
but polls suggest that people expect the government to solve unemployment, improve economic
situation, develop agriculture, decrease taxes, increase pensions, solve social issues and restore
territorial integrity. “Restoration of justice” is on the 8th place, 51% of respondents said that at least
some of those investigated should be arrested; 30% think that all of them should be arrested; 12%
thought, none of those who were being investigated, should be arrested. At the same time, the
government has been given a relatively long grace period by the electorate: people don't expect
radical improvement overnight. More than half (57%) of respondents said in February that Georgia is
developing in a right direction; 27% said the economic situation has improved (11% said it
worsened). Socio-economic issues remain key priorities for the population – job creation seems to
be one of the top challenges for the new government.
External Stakeholders Review: Relations with Russia
The government has relatively small room to manoeuvre when it comes to relations with Russia – the
territories are already occupied, the mandate of the EU monitoring mission (EUMM) is weak as it has
no access to Abkhazia and South Ossetia and the Geneva talks have so far brought few tangible
results. The attempt to 'normalise' relations with Russia is not only aimed at improving the situation
with Abkhazia and South Ossetia but also to improve the situation of almost one million Georgians
currently living in Russia and address the problems with trade and visas. Pragmatic rapprochement
between Tbilisi and Moscow is important, especially on issues related to renewing economic links as
these have critical implications for Georgia's economy – much more than for Russia's. At the same
time, it is not clear what benchmarks does the Georgian government have for measuring the
progress of its talks with Russia and how far it is willing to go in these negotiations.
For Moscow, its presence in Abkhazia and South Ossetia has more to do with Moscow's red lines
about Georgia's Euro-Atlantic integration, not with personalities in Tbilisi. Russia might seek greater
cooperation with Georgia on anti-terrorism ahead of the Sochi Olympics in 2014 but the atmosphere
has been soured by the recent unilateral extension of the administrative border line between South
Ossetia and the rest of Georgia deeper into Tbilisi-controlled territory. It is unlikely that the Geneva
talks will deliver progress anytime soon – in the meantime, Abkhazia is turning into an ethnocracy:
president and parliament members must be ethnic Abkhaz. Borderisation of the ABL continues too,
especially in South Ossetia, and it negatively affects the well-being of local population on both sides
of the ABL. Neither South Ossetia neither Abkhazia have resources for a full-fledged independence;
their only option is either russification (already on-going) or joining Georgia's European integration.
Given Russia's red lines on Georgia, the attempt of Tbilisi to improve relations with Moscow whilst
aiming to achieve de-occupation of breakaway territories and Euro-Atlantic integration might achieve
limited results beyond possible improvement of economic, cultural and social ties. But the on-going
talks, even if fruitless, might decrease the chances of another escalation or war.
While both the government and the opposition agree that an eventual re-integration will be a
difficult and long-term process and that Moscow is currently unwilling to proceed in this direction,
they differ in the way they see the role Georgia itself played in the build-up to the 2008: the
government argues that by failing to meaningfully engage Sukhumi and Tskhinvali, Tbilisi created
conditions on the ground that were exploited by Russia. The government's policy therefore seeks to
improve ties with populations in Abkhazia and South Ossetia but also to investigate the adequacy
and proportionality of the previous administration's response to the Russian provocations. Moscow
remains hostile to any direct engagement between Tbilisi and the breakaway territories' authorities –
but Sukhumi and Tskhinvali are also concerned and suspicious about the bilateral engagement
between Tbilisi and Moscow. There is an agreement between political actors in Georgia that people-
to-people contacts between populations on both sides of the ABL should be encouraged, practical
areas include healthcare, education, infrastructure projects, gas/water sharing facilities.
The West is not involved in the Georgian-Russian bilateral initiative; there was also very limited
public criticism in the West of the recent change in the ABL. Visa-liberalisation for Georgian citizens
traveling to the EU might greatly increase Georgia's attraction among the population in the
breakaway regions. The US remains heavily present in Georgia, since 1993 it has provided more than
$3billion in assistance and Washington's political clout in Tbilisi remains substantial. The US
embassy’s role during the 2012 parliamentary elections in Georgia has been instrumental and
according to a number of participants, continues to be more important than that of the voice of the
There is a relative continuity in the new government's economic policies with those of the previous
government: no major changes took place, even the labour code has not been changed as drastically
as many suggested it would. According to a UNDP study, more than 70% of Georgian population
remains vulnerable to social and economic changes. Georgia's economic growth is currently caused
by big domestic demand and partially by foreign investments. The optimistic forecast of 6% growth in
2013 was based on expectations of greater productivity in the agriculture sector, increased tourism
and benefits of the re-opened access to the Russian market as well as FDI inflows into manufacturing
sector – but the forecast has been recently cut to 3%. Restoring confidence of domestic and foreign
investors is the key challenge for the government through changes in legislation and incentives
policy, property protection and anti-corruption and anti-monopoly measures. Although most of
Georgia's companies are small/medium-sized, previous government has focused mostly on big
business, there is no clear vision for development of the SMEs sector. Export promotion also needs
to be streamlined. DCFTA might boost Georgia's exports, 9% short-term, 12.4% long-term; GDP
forecasted to increase 1.7% in the short run and 4.3% in the long-run; chemical, petrochemical and
machinery industry expected to benefit the most from the DCFTA; however, great deal of standards
and regulations are yet to be implemented. DCFTA impact on job creation will be marginal, according
to various estimates, real benefits from DCFTA will come in mid-term. So far, the government has
not unveiled a strategy to tackle unemployment; it has not presented a clear strategy for enhancing
Georgia's economic development and growth. Tax code also needs to be improved – the current
legislation offers few possibilities for companies to protect themselves in tax disputes with state
If the forecasted economic growth of 6% does not materialise, it is not clear where will the funds to
fill the gap in state budget come from. The renewed exports of Georgian wine to Russian markets will
help the wineries, but will have only a modest effect on Georgia's foreign export ($25-50 million in
2016) – Georgian wines became more expensive, export is limited to 1 million bottles per year and
there is an influx of cheaper wines on the Russian market that might price out the Georgian wines.
The merger of wealth and power remains – previously, UNM was linked to a number of businesses
and now the country's richest man runs Georgia and contributes to several government initiatives
out of his own pocket. There is no clear division between private funds and state funds that are put
into various government initiatives – there needs to be more regulation and transparency. Rules
governing the functioning of the Investment Fund, Sovereignty Fund and the Partnership Fund,
established by the government to stimulate economic growth, remain unclear.
Remittances continue to play an important role in Georgia's economy, especially in the regions with
highest unemployment. Due to the economic crisis in the EU and the US these have been falling. Half
of these still come from Russia, Greece comes second.
The population continues to support Georgia's EU membership (67% strongly support; 21% support).
However, the EU is seen only as the fifth most important partner after the US, Russia, Azerbaijan and
Ukraine. The Association Agreement and the DCFTA will be crucial for Georgia's foreign policy as well
as domestic politics and economy – negotiations are on track to be concluded before the Vilnius
summit in November this year. Despite this progress, there is no coordinated information campaign
about these steps run by the government or the EU itself. Steps towards visa liberalisation, one of
the most attractive offers the EU has for Georgia, have been partly delayed by the elections and
political transition – now steps need to be taken to improve document security, border management,
asylum policy, public security and fight against corruption. Improvement in protection of ethnic
minorities' rights, status of minority languages and anti-discrimination legislation might be
potentially divisive, given the role of the Church in country's politics. The May anti-LGBT rights
demonstration shows just how much can the pro-European and Orthodox values clash – there needs
to be much more attention devoted to civic education.
The EU is not seen only as a foreign policy choice – the population expects the EU to help on number
of their everyday problems such as poverty or unemployment, education or healthcare – the EU can
play a bigger role here by providing capacity-building for civil servants and state agencies as well as
local administration bodies, promoting entrepreneurship and a better business environment. This is
the case for most of the country and for most of the activities the EU is doing: participants pointed
out that there is little public awareness about the aid the EU provides to IDPs in Georgia. The EU can
also assist with the reform of public administration and regional decentralisation.
Who are the main drivers of Europeanisation of Georgia? TV remains the main source of information
for general public, but information about the EU is scarce, especially in the regions: civil society and
the media need to play a bigger role to spread these messages outside Tbilisi. Youth needs to be
specifically targeted as potential drivers of change: younger people are now more religious than the
older generation; priests are important local opinion shapers and need to be engaged much more in
the debate about Georgia's future as well as its relations with the EU.
There remains a consensus among the government and the opposition on Georgia's Euro-Atlantic
integration. This is also because despite the ruling coalition's diversity, institutions working on Euro-
Atlantic integration are all led by the government's most pro-Western personalities. Is this course
sustainable if the composition of the ruling coalition changes? The government needs to do a better
job to explain the implications of Georgia's closer relations with the EU, currently there is little
awareness about what will the Association Agreement and the DCFTA bring to Georgia. The
Association Agreement and further integration should be used by the EU as a positive incentive for
the government and the opposition to seek compromises and diffuse political tensions. There is a risk
that with the on-going investigations of the former UNM officials, the EU agenda might become too
Although Tbilisi's determination to join the EU is strong, there is not guaranteed end-game; unlike
elsewhere in the Caucasus, Georgia's pro-EU stance represents a civilisational choice, rather than just
purely political and was first articulated in early 1990s. For number of Georgians Russia remains an
option for doing business but there is little support for deepening political or economic integration
with Moscow via Eurasian Economic Union.

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